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This paper explains rising labour unrest among Chinas state-owned enter-prise employees through an examination of the tensions between the ChineseCommunist Party (CCP) and urban industrial workers. In so doing, itassesses the way the CCP has responded to labour pressure for better indus-trial and political representation since the late-1980s, and how it has shownconcern over workers attempts to form independent labour organisations,seeking instead to contain an increasingly restive working class within theframework of state-controlled unionism. We argue that the CCPs relaxationof centralised control over a more open, mixed economy has not beenmatched in the area of labour representation by a greater tolerance of autonomous organisation, leading to intensifying conflict with labour.

This article examines the ways in which workers in Chinasstate-owned enterprises (SOEs) have responded to thechanging nature of those enterprises during the reform

period since . In particular, we assess the causes of the risingincidences of labour unrest among SOE employees from thesecond half of the s onwards, as drastic restructuring of thestate sector began to take place and unemployment reached its

highest levels in China for decades. Protests over lay-offs,bankruptcies and unpaid wages and pensions reached a stage inwhich elements of the reform programme became threatened with

Introduction

Chinese state-enterprisereform: Economic transition,labour unrest and worker

representationJohn Hassard, Jackie Sheehan and Xiao Yuxin

Abstract


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Whither SOE workers?

delay, as local and national governments sought to contain workersresentment. Yet, as will be seen in this paper, sometimes theseefforts to mollify workers succeeded only in further stoking theiranger at what they perceived to be patronising and token

concessions that did not address their most important concerns.The intention of the analysis developed in this paper is toexamine the tensions between state capitalism and statecorporatism in the relationship between the ruling ChineseCommunist Party (CCP) and urban industrial workers. Inparticular, we explain how the CCP has responded to labourpressure for better industrial and political representation since thelate-980s.

The Chinese government has shown particular concern overattempts to form independent labour organisations in this period,seeking instead to contain an increasingly restive working class,now subject to a high level of employment insecurity, within theframework of state-controlled unionism. We argue that the CCPsrelaxation of centralised control over a more open, mixedeconomy has not been matched in the area of labourrepresentation by a greater tolerance of autonomous organisation,leading to intensifying conflict with labour, particularly ineconomically disadvantaged areas of the country.

Structured in the form of a contemporary historical accountinformed by labour-process analysis, we offer a contemporarynarrative that documents the evolving relationships betweenworkers, official trade unions, SOE management and the state. Theevidence for our arguments is distilled from, on the one hand,information gathered during visits to state-owned steel companiesin the process of implementing economic reforms,1 and on theother, from archival/textual materials on the practices and effectsof SOE restructuring, notable among which are specialistpublications on the Chinese economy as well as news media, and

company and state literature.

SOE workers have conventionally been viewed as being a veryprivileged group within Chinese society an elite section of theworkforce amply compensated for its still relatively low wage levelsby the benefits of the iron rice-bowl system of lifelong job

security and the provision of social welfare through the enterprise.A lack of labour mobility and their dependence on the enterprisefor such things as subsidised housing, medical care, childrens

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schooling, etc. have, in turn, been identified as major factors in SOEworkers relative political docility and loyalty to the ruling ChineseCommunist Party (CCP), at least up until the end of the s.Organized dependency (Walder, : ), whereby workers were

enmeshed in a network of individual patronclient relationships inthe workplace, has been seen as a successful means of preventingdisgruntled workers from resorting to any form of organised,collective resistance in most circumstances.

This view clearly has some basis in fact, since the largest andmost prestigious SOEs also those with the best resources interms of social welfare provision were, until the second half ofthe s, the least likely to experience major unrest among theirworkforces compared with other enterprises. We have arguedelsewhere (Sheehan, ; Hassard et al., , ; and see also L.T. White, ) that the benefits of the iron rice-bowl were alwaysdeliberately limited to a minority of the industrial workforce as awhole, with often far less generous benefits on offer in the morenumerous small and medium SOEs, which could not count on suchdocility from their workers. The general view that the Chineseindustrial workforce has been characterised by its passivity and theease with which it could be controlled has in any case beenchallenged by other accounts that stress the relative frequency ofunrest among Chinese workers. Such accounts also note theinvolvement of SOE workers in periodic protest movements thathave questioned the legitimacy of the party that claims to rule intheir name (Davis, ; Chan, ; Perry, ; Perry & Li, ;Sheehan, ; Hassard et al.,).

Even with reference to the pre-reform period, the depiction ofSOE employees as a favoured elite unwilling to bite the hand thatfed it was somewhat one-sided. Indeed, since , as reform hasprogressed, the steady undermining of the iron rice-bowl systemhas further reduced the effectiveness of what was never a

completely reliable method of containing workers grievances andassertions of collective interests.

The recent outbreaks of labour unrest, moreover, are not simplythe reaction of a previously privileged group to the loss of itsexclusive benefits, for some SOE workers now explicitly reject theenterprise-based paternalism of the past. Rather than campaigningfor its reinstatement, such workers are instead organisingindependently to press for the legal rights they feel are due to themnow that they find themselves in an insecure, quasi-capitalist

employment relationship in their enterprise. These legal rightsinclude the right to adequate welfare and pensions, and the right toorganise their own trade unions.

Chinese state-enterprise reform


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Before focusing on the most recent phases of Chinas transition, weturn for historical context to an examination of workers responses

when the CCP government first expressed its intention to end theiron rice-bowl system in the late-s and early s. Given theearly success of agricultural reforms in boosting rural incomes,workers had high expectations of substantial material benefits fromurban reforms expectations that were deliberately encouragedby the authorities (Yang, . Workers also anticipated a markedimprovement in enterprise management (Sheehan, ), theincompetence of which they saw as being at least as important afactor in low industrial productivity as their own much-criticisedjob security and egalitarianism (G. White, ).

Yet alongside these positive expectations, the fear of a return tothe pre- era of high levels of job insecurity andunemployment also became evident at an early stage (Sheehan,). Workers misgivings about reform were much more thansimple opposition to a change in the nature of the Chineseenterprise that would rob them of their material privileges.Workers have not at any stage, in fact, been opposed to reform assuch, since they of all people have been well aware of the manyproblems within state-owned industry in China, and of the needfor significant change in order to improve efficiency and raiseproductivity (Sheehan, ). Rather than seeking to preserve theold system for its own sake, they have opposed corruption andperceived unfairness in the conduct of the reforms, and increasedinequality and economic hardship for workers households as aresult of reform. They have also consistently objected to having theblame for the poor performance of state-sector industry laid attheir door. Throughout the reform period, the government haspointed to the old, egalitarian eating from one big pot mentality of

the iron rice-bowl employee as being the main or even the solecause of Chinas low labour productivity (Howard, ; Sheehan,). But while the state-controlled press presented the excessivejob and wage security of the iron rice-bowl system as a distortionof socialism, SOE workers themselves persisted in viewing it asperhaps the only unequivocal achievement of the pre-reform era,and certainly the feature of that era with most value to them.

By the end of the s, job insecurity had emerged as workersmain worry in the new economic environment, affecting virtually

the entire state-sector workforce and not just the minority actuallyaffected by the introduction of fixed-term contracts (Walder, ;Wilson, ; Warner, ) with job security panic (Walder, :

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Reform and workers in the 1989 democracy movement


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). This new perception of insecurity, together with concernsthat stagnating wages were being overtaken by high urban inflation,in large part accounts for the willingness of so many workers tosupport and participate in the democracy movement of spring .

Another factor that should be taken into account here is the extentto which workers felt their social and political status to have fallenas a result of the reforms. Measures such as the introduction of thefactory director responsibility system (FDRS) (see Chevrier, ;Child, ) and a general emphasis on increasing the power of topmanagers at the expense of workers, the workers congress, theofficial trade unions, and even the enterprise party branch, severelyeroded any sense workers had of being masters of the enterprisein any real sense. The danger that the FDRS would undermine the(in any case inadequate) machinery of democratic management inChinese enterprises had been recognised at the time the system wasintroduced, but nothing was done to prevent this outcome(Sheehan, ). By , the labour-movement press wascomparing highly centralised management under the FDRS to theSoviet-inspired one-man management of the early s (WorkersDaily, June ).

The contracting-out of enterprises to managers for fixedperiods also contributed to workers perceptions of themselves notas employees of the state, with the political status that went withthat, but simply as hired hands wage-labourers with no stake inthe enterprise beyond working for the factory director, whom theyhad come to perceive as being in effect the owner of theenterprise (Wang & Wen, : ). Where contracting-outdecisions involving their own enterprises were announced toworkers on the evening news without any prior consultation, thiscould only increase their sense that they were being treated as partof the fixed assets of the establishment, which management coulddispose of as it pleased. To workers, it seemed there had been a

final breach in the social contract that had offered them security ofemployment, a minimum standard of living and a limited say inmanagement in exchange for tolerating low pay and not organisingindependent unions.

This breach of an implicit industrial and political bargain thusleft workers in a much more unambiguously antagonisticrelationship vis--vis management and state authorities. Theirincreasingly frequent response to this shift in the months leadingup to the democracy movement was the use of strikes and self-

organisation, although these kinds of action were by no means asrare before the late-980s as is often supposed (Sheehan, ). Themovement itself included the widespread formation of



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autonomous workers organisations explicitly directed at playing apolitical role beyond the enterprise as well as at defending workersinterests within it. SOE workers, including some from several ofthe largest and most prestigious enterprises in the country, played

a particularly prominent part in the movement in , although theCCP has consistently sought to downplay or deny this (Hassard &Sheehan, ; Sheehan ).

Thus workers had already manifested, in the democracy movementof , a growing desire ... to be treated as full citizens (Walder &Gong, : ), declaring that we are not prison labourers whohappen to live in society, but legal citizens of the republic (Mok &Harrison, : ). They also showed clear signs of perceivingthemselves to be in much the same position vis--vis enterprisemanagement as employees in privately-owned establishments,which in turn they saw as giving them the right to form completelyindependent organisations through which to defend their collectiveinterests against those of SOE management. These trends onlyintensified as the s progressed, and particularly since the long-anticipated announcement came, at the fifteenth CCP congress ofSeptember , that henceforth only about five hundred of thelargest and most strategically significant SOEs would be kept inlong-term state ownership, with the rest allowed to close, merge orgo bankrupt as the market dictated. The unprecedented large-scalelay-offs from SOEs that have since taken place have only reinforcedthe view of many SOE workers that they have become the mainlosers in the reform process to date. The level of job insecurity thatbrought workers onto the streets during the late-s and in the989 democracy movement paled into insignificance whencompared to the plans of many large SOEs to shed up to percent of their workforces (Hassard & Sheehan, ; Kuehl &Sziraczki, ). The high incidence of unrest among former andcurrent SOE employees should not, therefore, come as anysurprise, and nor should the fact that protests are frequentlyaccompanied by calls for independent unions.

SOE downsizing in the late-1990s

We have described elsewhere (see Hassard & Sheehan, ; Hassardet al., , ) how managers in the state sector have been chargedby the CCP government with the responsibility of avoiding

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Workers and enterprise reform in the 1990s


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widespread unrest among workers through the careful preparationand conduct of lay-offs. We have also argued that this is aresponsibility generally taken very seriously by the top managementof the largest SOEs. In most cases, top management has also

benefited from a level of resources that enabled them to make thechannel before the water comes in other words, to prepare orfacilitate acceptable alternative destinations for redundant workersbefore the latter are actually forced out of the SOE workforce. In themid-to-late s, many large SOEs established internal labourmarkets to provide retraining and redeployment for surplus workers,and also set up a range of service-industry sub-companies to absorbredundant labour, as well as offering incentives for early retirementor voluntary severance in the form of start-up funding for smallbusinesses (Sheehan, ; Hassard et al., ). However, such SOEsalso set themselves dates by which very large reductions in theworkforce were to be achieved. Also, Premier Zhu Rongjis insistenceon a 2000 deadline for turning round all SOEs was constantlyrepeated in the press; so even here it was not possible to avoidcompulsory redundancies for much longer. The largest SOEs werethus by no means immune from unrest over job losses, unpaid wagesand pensions and the like (South China Morning Post, December), and large-scale compulsory lay-offs were only expected to addto the level of discontent.

The situation was already much more serious, though, for smalland medium SOEs, many of which had long been running at a loss.Since the mid-s, levels of unrest, sometimes involving violence,have been highest among the downsized workers of thesecompanies. The smaller and less prosperous SOEs have lacked theresources to be able to cushion the blow of redundancy forworkers, as well as often not being able to afford the necessaryemployers stake that would enable their workers to participate inpilot social-insurance and pension projects, for example. They were

more likely to be declared bankrupt or taken over by moresuccessful firms at very short notice, often with no consultationwith the workforce whatsoever, leading some to speak of EastEuropean-style shock treatment (China Labour Bulletin, a), asworkers were disposed of without warning to find they had onlyvery limited and patchy access to welfare provision to keep themfrom poverty. The lack of consultation or even information aboutthese vital decisions seems to have been an important factor inprompting workers to take their protests to the streets around the

plant, or to surround local government offices in an attempt to forcethe authorities into discussion. It has probably not helped that theusual mechanisms for consultation within the enterprise the



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workers congress and the trade union, never particularly effectiveeven in the pre-reform era have been thoroughly underminedby the reforms tendency to stress managerial prerogative above allelse. In many cases, managers who have grown accustomed to

exercising authority unchallenged do not merely neglectconsultation with workers, but are actively hostile to the idea. It isnoticeable, too, that areas that pushed ahead fastest withprogrammes of small- and medium-sized SOE bankruptcies, suchas Sichuan province, experienced particularly frequent andwidespread protests by the workers affected. Thus the policy,following the fifteenth CCP congress, of freely allowing SOEbankruptcies, mergers and takeovers was in many respects a recipefor increased labour unrest nationwide.

Rights, not charity

Even where SOE workers accepted the need for restructuringinvolving lay-offs, there was no acceptance that it should be carriedout regardless of the impoverishment of workers who could notrely on regular receipt of benefits, pensions or emergency cost-of-living allowances from local government. Demonstrating the extentof the economic hardship caused by the lay-off policy, figures fromthe State Statistical Bureau indicate that per cent of urbanhouseholds experienced a drop in income during , mainlybecause of the impact of lay-offs and unemployment. To the million laid off in , it was predicted that a further millionwould be added by the end of 998 (China Labour Bulletin, b).Around per cent of urban households below the official povertyline contained a member who had either been made redundant orwho, although technically still employed, was not actually workingand was thus receiving only a fraction of normal wages. In the mid-s, even those still employed and working normally could gounpaid for months at a time (Sheehan, ). It is important toremember, therefore, that workers were not simply complainingthat a very comfortable economic position had become a little lesscomfortable: real hardship had been caused by the scale of the lay-offs, and notably so since the beginning of . Former SOEworkers felt the loss of their previous social and political statuskeenly, especially where the loyal pioneers of building socialism(Schueller, : ) in the old heavy-industry heartland had beenreduced to hawking goods on the city streets the kind of work

previously the preserve of poor migrants from the interiorprovinces. Besides this loss of face, the new poor (South ChinaMorning Post, April ) of laid-off SOE workers had genuine

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worries about finding money for family medical bills, childrensschooling and even for putting food on the table, and for many thiswas the first time in their lives that they had experienced this levelof insecurity (Wang Xiaodong, ).

Discontent and unrest in the last years of the s reached sucha level that an official response had to be made in order to head offoutright rebellion. Well into , official statements continued toemphasise the unfortunate necessity of throwing large numbers outof work, urging those affected to change their ideas about theirentitlement to employment and the type of job they could expect(South China Morning Post, September, December ). Sincethen, more emphasis has been laid on making provision forunemployed workers in terms of benefits and re-trainingopportunities, and on offering emergency assistance to householdswho cannot make ends meet. However, some of the efforts ofmanagers, the official trade unions and local governmentrepresentatives to express sympathy and offer practical help toimpoverished workers only provoked further anger among therecipients of these gestures. During the late-s, the presentationto workers of food parcels and cast-off clothing by the official All-China Federation of Trade Unions (ACFTU) was characterised as:a nauseating and clumsy combination of propaganda and alms-giving, increasingly resented by workers who feel that they deservemore than charity. The answer to unemployment is real training forreal jobs, not charity from government ministers seeking photoopportunities in fleeting and stage-managed visits to the homes ofthe poor (China Labour Bulletin, c).

Besides televised aid visits to workers homes (Schueller, ),other charitable gestures included pre-winter collections for needyworkers with, for example, collection points for warm clothing,food and cash donations being set up outside a number of publicbuildings in Beijing in , including outside the Ministry (now theBureau) of the Metallurgical Industry (South China Morning Post, October ).

Visits to workers homes to offer aid to the needy have a longhistory in China, going back to the s, but even then wereviewed with suspicion by workers, who saw them as little more thana public-relations gesture that failed to solve the underlyingproblems they faced (Sheehan, ). They are even less wellregarded by many workers now, as the democracy movement themeof the need for enforceable legal rights, rather than paternalistic

benefits that can be bestowed or withheld at the whim of theauthorities, has returned to prominence in the last few years. Againcasting themselves as the main victims of reform, SOE workers



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point to the sweeping changes made in China since the late-s,and increasingly express the view that measures such as theestablishment of a non-enterprise-based welfare system and otherlegal protections for workers could and should have been possible

as part of this wholesale restructuring of Chinese society and theeconomy. They reject the argument that there is no money to fundsuch projects, insisting that it is rather a question of thegovernments priorities.

It is certainly noticeable that during the reform era, the passingof laws offering some degree of protection for workers interests,such as the Labour Law and the Enterprise Law, has lagged farbehind the establishment of a centralised, disciplinarian anduncommunicative management style on the shop floor. While it ismostly the foreign-investment manufacturing operations aroundthe Special Economic Zones that have become notorious for theirharsh, almost militarised style of management and their abuse ofworkers rights, SOE management has also been influenced to acertain extent in the same direction, with the work system featuringquota increases and speed-ups, longer working hours, new controlsover labour attendance, and the use of monetary sanctions andpenalties to control labour. This has been a trend since the early980s in areas like the south-east, which were pioneers of the urbanreforms, so that the passing of the Labour Law in , whichasserted for the first time in law that workers were the true mastersof the enterprise, could have little effect against such a wellestablished trend of power being concentrated in topmanagements hands while workers felt themselves to have beenreduced to the status of hired labour. In their demand for legalrights rather than paternalist gestures, restive workers aremirroring developments in oppositional political movements inChina, and the legal line of argument is one that could proveextremely difficult for the government to deal with, given its own

rhetoric on the importance to successful reform of the rule of law.

The impact of corruption

With reference to the democracy movement, Walder (: )noted that corruption and inflation then had the effect ofpoliticizing workers dissatisfaction with the impact of economicreform. Almost two decades on, issues of corruption andunemployment are playing a similar role. Corruption is generally

acknowledged to be widespread in China, with the governmentitself running high-profile national campaigns against graft andtaking pains to publicise cases in which officials have been caught

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and convicted of corruption offences. It is impossible to know howmuch corruption is occurring in the present phase of state-enterprise restructuring, but there is certainly considerable scopefor it, since companies are merged, taken over or declared bankrupt

in increasing numbers and assets disposed of at very short notice,with minimal public debate or information about the process. Whatis most striking, though, is that in decisions about the fate of theirenterprises, corruption is now almost universally suspected byworkers. Here again, an almost total lack of advance warning letalone consultation with the workforce before such decisions areannounced only adds to suspicions that the decision-makers havesomething to hide. Corruption is also frequently suspected in casesin which factories are still in operation and goods are leaving thewarehouse, but workers are told there is no money for wages, as inthe following case from Hunan province in the late-s:

At our factory, we went to the union because wehavent been paid for two months The answer we got fromthe union guy was: Even the union funds havent been paid,go and see the manager. So we went to the boss and he said:The factory doesnt have any money at the moment. As soonas we have the cash, we will definitely pay the wages. These answers dont add up. We are still clocking on everyday, production is going on as normal, and the warehouse cer-tainly isnt crammed full with unsold goods. So how comethere is no money? (China Labour Bulletin, d)

In the economic climate of the present reform period, it iscommonly speculated that goods leaving an SOEs warehouse arebeing dumped on the market at prices that earn the enterprise littleor no profit. SOEs in the building materials, metallurgical,machinery, textiles and petrochemicals industries, among others,

have been warned about such dumping by the government. It is alsoquite possible that in this and many other cases, any money whichis coming in to the enterprise is needed to cover outstanding loansor other liabilities, and cannot be spared even for basic wages. Butalthough workers accept indebtedness as a common reason for theclosure of SOEs or the failure to pay wages, they tend to blame theextent of the debt itself on previous mismanagement andcorruption at the top, still seeing management misconduct orincompetence as the root of the problem. While only a few

documented cases of this type have been given prominence in thestate-controlled media, there is a much more general andwidespread tendency among the state-sector workforce to see



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corruption and mismanagement as the main and most plausibleexplanations when the closure of an enterprise is announced orwhen wages go unpaid, and this only enhances the animosityalready evident between managers and workers.

The CCP governments own statements about the dangers ofcorruption in the process of state-enterprise restructuring addcredence to workers suspicions. Decisions about the closure ormerger of SOEs and the establishment of the share-holding systemin SOEs have been identified as areas in which particular care mustbe taken to guard against corruption. Measures have been adoptedto prevent the improper disposal by managers of SOE assets something that was a major problem under the contractresponsibility system (CRS) in force across much of state-ownedindustry from the early s until (Hassard & Sheehan, ).Under the subsequent modern enterprise system (MES) reformprogramme, managers were explicitly charged with increasing or atleast maintaining the value of state assets as part of their contractsof employment (Hassard et al., ). But during , for example,the corrupt disposal of assets was highlighted as being the majorfactor in the bankruptcy of a textile factory in Shanxi, where,workers had gone unpaid for more than a year (South China MorningPost, September ). Workers frequently refer to managershaving enriched themselves through the illicit disposal of stateassets at a time when their own wages were being paid irregularly ornot at all. Workers suggest that managers were able to leave SOEs totheir fates and move on unscathed to another post, seeing this as auniversal pattern. Again, official warnings and measures taken toguard against this type of action tend to be taken by workers asconfirmation of the scale of the problem. The asset-disposal formof corruption acts as a politicising factor in workers discontent in aspecific way: it helps to reinforce the impression among manyworkers that SOE managers are in effect the owners of the

enterprise, or at least that they can behave as if they were. Thus anelement of class-based animosity enters into workers attitudes toenterprise restructuring, adding to the politicising effect of thewhole issue of official corruption.

Issues of redundancy, redeployment, rights and graft provide much

of the context for tensions in the relationship between the CCPand urban industrial workers, and notably also provide context forthe way the CCP has responded to labour pressure for better

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Labour representation under state capitalism


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industrial and political representation since the late-980s. Theseare essentially tensions between state capitalism and statecorporatism. The Chinese government has shown particularconcern over attempts to form independent labour organisations in

this period, seeking instead to contain an increasingly restiveworking class, now subject to a high level of employmentinsecurity, within the framework of state-controlled unionism.Thus the CCPs relaxation of centralised control over a more open,mixed economy has not been matched in the area of labourrepresentation by a greater tolerance of autonomous organisation,leading to intensifying conflict with labour, particularly ineconomically disadvantaged areas of the country.

Elements of this scenario perhaps reflect the third of theperspectives on state capitalism identified by Pollard () in hispaper on the Communist Party of the Philippines, namely thelibertarian Marxian perspective. The three main premises of thisperspective are: that the means of social production is heldprivately from the working classes and those who depend on themfor survival; that there is no empirical evidence that these peoplecontrol the organisations controlling the ruling Communist Party;and that the top Party leadership gets its wealth and power like amore ruthless and collective capitalist class, extracting surplusvalue produced by the labour power of the politically impotentworking classes. This is a perspective on the relationship betweenthe Chinese Communist Party government and workers in thePeoples Republic of China that had begun to be articulated byworkers themselves at points of crisis in that relationship as earlyas the s. During the Cultural Revolution (), the idea ofthe CCP as a new, exploitative ruling class extracting surplus valuefrom the working classes and passing on its privileges to itsdescendants became a commonplace one among the more radicalparticipants in the movement, and it was an idea that many of them

carried over into the first stirrings of Chinas democracy movementin the late-s and early s. The inspiration of PolandsSolidarity movement only gave extra impetus to an existing moodamong activists that Chinese labour, if it ever could have regardedthe CCP and the partys subordinate institutions as representing itsown interests, was now in obvious need of independentorganisations with which to defend those interests within theworkplace and in society. The official trade unions thoseaffiliated to the All-China Federation of Trade Unions (ACFTU)

had proven wholly inadequate defenders of labours interests atany point in which those interests came into conflict with those ofthe state. In a state-corporatist model, the official unions have been



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the only organisation in China permitted to represent workerscollective interests and grievances to state authorities. The unionstransmission belt function between labour and the state issupposed to work in both directions, but historically in the PRC it

has mainly operated in top-down way, as a means of imposing statepreferences onto workers.Since the early s, the Chinese state has faced a number of

conflicting priorities regarding the relationships between itself,labour, and the official trade unions. In the aftermath of the protests, the official unions were punished for the support they hadoffered to the movement support given publicly in the form of afinancial contribution, but by some accounts also more significantlyin their backing of a proposed general strike in mid-May 989 (WangShaoguang, ). A number of leading figures in the ACFTU werepurged, and the official unions at all levels were encouraged to leadthe condemnation of the illegal independent labour organisationsformed during the movement. Yet the official unions still had animportant role to play as a transmission belt between labour and thestate, and this role grew in importance as the state increasinglywithdrew from direct involvement in management at the enterpriselevel (Zhang, ). This separation of government and managementfunctions was a key aim of the modern enterprise system andgroup company system reform programmes that had been ongoingin state-owned industry since . As noted, the other key feature ofSOE reform since has been a programme of unprecedentedlarge-scale lay-offs involving up to per cent of the workforces ofsome large SOEs; and here, too, the assistance of the official unionsand the workers congress has been important in the preparatorywork carried out within enterprises to engender minimal acceptance,if not enthusiasm, among the workforce of the necessity ofshedding labour for the sake of the companys future.

Since Chinas accession to the WTO, it has also become more

important for Chinas official unions to be recognisedinternationally as legitimate representatives of the interests ofChinese labour. This seems to have been one of the main motivesbehind the October revision of the Trade Union Law. Therevised Law contained provisions that potentially offered workersin China more control over their unions and more scope to use theunions legal rights to defend their own interests, although much ofthis was undermined by an overarching insistence on the ACFTUspolitical subordination to the CCP, and on its key responsibility for

economic development rather than for representing the interests oflabour (China Labour Bulletin, ). It appears to have beensufficient to win back the ACFTUs position on the governing body

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of the International Labour Organization, which the official unionshad lost in because of their acquiescence in the suppression ofthe democracy movement protests (Chen, ). Thesedevelopments were also possibly a response to pressure from

within Chinas official unions for greater autonomy to defendmembers interests in an era of general intensification of thelabour process, a punitive style of management, and the ever-present threat of unemployment. Indeed, some within the ACFTUappear to recognise that this is the only way the official unions willever be able to undercut the growing appeal of independent unionsin China.

The overriding priority of the CCP government since the late-s, however, has been the maintenance of what it usually termssocial stability; that is, the avoidance of widespread and seriousunrest such as might threaten the governments hold on power. Wecan comment on how this basic concern has affected theimplementation of other policy priorities if we look at the way theprogramme of lay-offs in large SOEs has progressed since .Initially, the governments statements on the issue stressed that theshort-term pain of the process for those who lost their jobs was aprice that must be paid for the longer-term viability of thecompanies concerned, particularly since once China had joined theWTO, those companies would soon be subject to the full rigours ofinternational competition. A change in attitude was perceptible byearly 998, however, as far more attention was given to aiding laid-off workers and their families financially, and to expressingsympathy for their predicament. Moreover, many SOEs revisedtheir plans to complete lay-offs by the end of December ,allowing themselves another three years to finish the process. Onereason for this apparent change of heart was the impact of the regional financial crisis, which put many SOEs in economicdifficulties as they faced increased competition from countries that

had devalued their currencies. But the main reason was the upsurgein labour unrest, strikes and protests sparked by the redundancyprogramme. The incidents that gained the most press attention(and it must be assumed that many incidents go entirelyunreported, given the restrictions under which Chinese andoverseas journalists operate within the PRC) most often involvedthe workforces of smaller SOEs that had been left to sink or swimon their own after September . Many small SOEs had eitherfailed to pay workers for months at a time, or had closed down or

been sold off very abruptly in a way that suggested corruptdealings to the workers who had lost their jobs. But larger SOEs,including some of the best-known in China, were certainly not



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immune from unrest: they also responded to increased governmentpressure to maintain stability by adopting an even more cautiousand gradualist approach to lay-offs, hence the three-year extensionof their original deadlines for shedding surplus labour.

This, then, became the dilemma for the Chinese state: it wishedto withdraw from enterprise management almost completely andleave managers in charge of most decisions, yet it also wished toinfluence and shape the transformation of its remaining SOEs intointernationally-competitive corporations that would functionsolely as economic entities, not as providers of welfare benefits andfull employment as a social good, which was the role of SOEs inthe Mao era. The effects of reform, however, came to convincemore and more workers of the necessity of having an independentunion organisation under their democratic control. Such a form oforganisation would function to defend their interests against thedemands imposed by an increasingly assertive new managerialelite. While the state refuses to follow the logic of thediversification of Chinese society in the reform period and permitany labour organisation with a significant degree of autonomyfrom government, the stage is set for increasingly sharp andfrequent confrontations between the state and labour.

The extent to which the state really has withdrawn frommanagement in Chinas remaining SOEs varies from enterprise toenterprise. In general terms, autonomy has been most fully realisedin areas in which reform has progressed the furthest, typically theeastern seaboard and areas such as Shanghai and Guangdongprovince. In the interior, however, a real shift in authority in SOEsis still more potential than actual. As noted, the area in which stateinterference is most often reported is in questions of employmentand the divesting of surplus labour. A number of large SOEs thathave pioneered the MES reform programme have been compelledby local authorities to take over loss-making enterprises, not in

order to reform them and return them to profit, but solely in orderto guarantee the wages and pension payments owed to thosecompanies employees. This directly contradicts the general line ofMES reform, which is to reduce as far as possible the social andhistorical obstacles to large SOEs international competitiveness,namely a high proportion of surplus labour and the obligation toact as a welfare state in miniature for employees. But this hasoccurred even in areas in which, in general, the aims of reform infreeing management to manage without state interference have to

a large extent been achieved.SOE management, despite the setting of apparently firm and

final deadlines by which large-scale lay-offs must be completed, is

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47

also fudging the issue of redundancies, partly as a result ofgovernment pressure to avoid provoking protests, but also becauseof a persistent thread in managers attitudes of paternalist concernfor workers fate once laid-off, and a Mao-era distaste for the

disposing of surplus labour as if it were just another asset of theenterprise. We have noted how the enterprise restructuring and theproliferation of sub-companies that has also taken place under theMES reform programme has enabled large SOEs to transfer largenumbers of workers to autonomous sub-companies, many ofwhich have been set up solely or mainly for the purpose ofabsorbing surplus labour.

Once this has been done, the parent company is able to report aheadline reduction in its workforce which appears to show that thetargets for getting rid of surplus labour are being met, although infact it will still, in the last resort, be responsible for meeting thewages of the workers transferred into a sub-company. As such, thesurplus-labour burden remains and is deemed to be a majorobstacle to SOE profitability, productivity improvements andinternational competitiveness.

In general, the Chinese state is still reluctant to abandon its state-corporatist approach to the representation of interests in a rapidlydiversifying society and permit truly autonomous representation ofthe interests of groups such as labour. It has been observed that theCCP has taken a cautious approach in dealing with actual instancesof unrest, attempting to avoid bloodshed in confrontations betweenthe security forces and protesting workers as far as possible. But thestates perception that independent labour organisations are anintolerable threat to its prerogatives can be seen in its treatment ofthe leaders of such protests (such as the Liaoyang Four: ChinaLabour Bulletin, , passim), where it has resorted to accusationsof terrorist tactics as well as long prison sentences in order todiscredit and contain those who have attempted to set up

independent organisations, even acting against them outside Chinasown borders on occasion.

This situation also leaves large SOEs unable to carry through thereforms that are supposed to enable them to compete on the worldstage now that WTO membership requires them to do so, and todate there are no signs that the new leadership of the CCP is anybetter equipped to resolve this dilemma of reform than were theprevious generation of leaders under Jiang Zemin. Labourspredicament in China following nearly thirty years of reform will

continue to generate protest and attempts at independentorganisation, and measured repression is unlikely to represent aviable solution in the longer term.



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The scale and conduct of the present round of SOE workforcereductions has brought about an increased incidence of unrest,

strikes and other protests among the workers affected. From themid-990s onwards, protests became so common in some areas ofChina that a Politburo Standing Committee member was reportedto have returned from a tour of the provinces complaining that hehad frequently been unable to use the main entrance to localgovernment buildings because of the almost daily occurrences ofjobless workers and destitute pensioners laying siege to theheadquarters of provincial and municipal administrations (ChinaLabour Bulletin, e). Over the last decade, the level of unrest hasbecome so significant that it has hindered the implementation ofother major reform measures, such as an end to subsidised housing.In recent years, the CCP leadership has taken the trend of frequentlabour unrest very seriously, recently rating it the third mostworrying threat to stability in China (after the activities ofseparatists in the Muslim northwest of the country and theTibetan independence movement), with the formation ofindependent workers organisations cited as a particular cause forconcern. Although concerned senior managers at some large SOEsslightly extended their deadlines for achieving workforcereductions so as not to aggravate the situation further, small andmedium SOEs tended to press ahead regardless.

The use of service sub-companies to absorb unemployed SOEworkers has been successful up to a point, but many of thesecompanies have also been reported to be losing money themselves,and there are concerns about market saturation. Thus this majormethod of dealing with potentially restive surplus labour appearsproblematic as a sustainable solution to the problem. Neither is thediversion of redundant SOE workers into self-employment

without difficulties. It is striking how often in recent reportedinstances of unrest, including many in which violent clashes withpolice are alleged to have occurred, taxi and pedicab drivers havebeen involved, many of whom are former SOE employees. Somemunicipal governments developed a policy of reserving a certainproportion of the restricted number of taxi licenses for laid-offSOE workers, but street protests have occurred when attempts havebeen made to tighten up licensing procedures, or to increase thefees payable by drivers to the local authorities. The SOE

backgrounds of these drivers seem a plausible explanation for theirvery frequent resort to street protests. Already among the obvious

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49

losers in the reform process, they do not take kindly to any furtherofficial action that makes it more difficult for them to earn a living.

It is all the more troubling for the CCP government that SOEworkers protests are increasingly both politicised and organised.

The belief that independent unions are the only means by whichworkers interests can be protected in the new, insecureenvironment brought about by reform is now more widely heldamong workers than at any time since . In addition to efforts toform autonomous organisations or to propagate the idea of doingso, a number of workers have also attempted to stand as candidatesin local peoples congress elections on a platform of workers rightsand/or of calling for proper, legally-guaranteed provision for laid-off workers. These local elections have repeatedly served as a focalpoint for unrest and pressure for political reform in China duringthe post-Mao period. Perhaps the most notable instance was in theautumn of , when many worker-activists involved in theDemocracy Wall movement stood or attempted to stand forelection as a way of publicising their views and highlighting thegulf between the citizens rights laid down in the Chineseconstitution, and local authorities actual response to any challengefrom outside the party establishment (Sheehan, ). This type oflegal or constitutional challenge to the CCP government is muchmore difficult for the authorities to deal with than a disruptivestreet protest, which can be categorised as selfish and misguidedtrouble-making. It also poses the threat of a link between restiveworkers and other oppositional political movements in the PRC,which are increasingly resorting to the same legalistic tactics.

As well as calls for and attempts to organise independent unions,there have also been moves by workers towards the formation ofindependent watchdog organisations to monitor and combat officialcorruption, and sometimes the same activists have been involved inboth independent union-organising and anti-corruption groups.

Official corruption is routinely spoken of wherever SOEs are failingto pay wages or being closed down, and workers allegations aboutthe privileged, secure and luxurious lifestyles of corrupt managersand officials bear a striking resemblance to similar accusations madeby worker-activists during the Democracy Wall movementand the 989 democracy movement. The politicising role ofcorruption-related grievances even extends to the inadequateprovision of welfare for laid-off workers, with official warningsagainst the misappropriation of funds intended for the unemployed

giving credence to protesting workers suspicions that moneyintended for them is being improperly diverted. Again, precedents



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can be found for this type of suspected corruption as a trigger forlabour protest going back to the s.

Most incidents of protest and self-organisation by Chineseworkers can still be described as local, sporadic and short-lived,

albeit increasingly common. The police have tended to moveswiftly against anyone involved in what might develop into anillegal organisation, and since independent trade unions are neverallowed to register with the local authorities (such registrationbeing a requirement of all organisations in China) they are all defacto illegal. But the corruption issue and the emergence of class-based animosity towards the managerial owners of SOEs give animportant and explicitly political dimension to the generaldiscontent evident among present and former SOE employees. Asmore join the ranks of the unemployed, it is very likely that theactivists who are pushing the cause of independent unions moststrongly will find a large and ready audience for their views,creating the potential for another serious crisis in the CCPgovernments troubled relationship with the industrial workforce.

Research funding was provided primarily by two awards from theEconomic and Social Research Council. Pilot investigations werefunded by the British Council and the Chinese Academy of SocialSciences.

Chan, A. () Revolution or corporatism? Workers and trade unions in

post-Mao China,Australian Journal of Chinese Affairs, no. , pp. .

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Bulletin, 13 February; online at .

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1. Following pilot visits during and , field data used in this paper

has been collected on a regular, mostly yearly, basis since . In the

main, our information is derived from a series of sixty-three semi-

structured interviews. Primarily, eight large steel SOEs carrying out

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